In the 2007 paperback edition of his book One Billion Customers, author James McGregor provides some clear insights into the economic transformation that China is experiencing.:

Chinese business continues to have incredible gains in world commerce. Chinese companies inhale best practices from around the globe. Six Sigma and ISO-9000 management principles are as deeply ingrained in the minds of Chinese managers now as were the slogans in Mao’s Little Red Book in their childhoods.

The world’s multinationals have poured into China to build world-class facilities that are critical parts of their global supply and R&D chains.

China has taken enormous steps to open its markets widely since joining the World Trade Organization. Foreign companies aren’t hesitating to move in where they can and gobble up market share and Chinese-owned companies.

While serveral hundred million people have been pulled from extreme poverty in the past three decades, the gap between rich and poor is getting larger and larger. The richest 10 percent of Chinese families now possess 40 percent of the country’s private assets while the poorest 10 percent own only 2 percent.

The average annual income of a Beijing resident is $2,263, while a farmer in Qinghai earns $277 annually.

Rich and poor in China now share the world’s dirtiest country. You can taste the putrid air in much of China, which is now home to sixteen of the world’s most polluted cities, and the rivers and lakes are colored in rainbow hues from industrial effluent.

THE RAPID RISE OF A NEW ECONOMIC SUPERPOWER

30 years ago, China was number 137 on the GDP list – just slightly ahead of Malawi. Today, China has the second largest GDP in the world. In the following video CNN’s Maria Bartoromeo interviews John and Doris Naisbitt about China’s booming economy and how it has fared during the most recent economic crisis.

IS THIS ECONOMIC GROWTH TREND SUSTAINABLE?

David Dollar suggests that the prospects for China’s continued growth are good for the next decade or so. However, as the labor force shrinks due to China’s One Child Policy and environmental degradation continues as China maintains focus on Economy over Environment, China will face issues for sustainable economic growth.

CHINA’S PRIMARY CHALLENGE IS ADDRESSING ECONOMIC DISPARITY

Jack Perkowski suggests that China’s Leadership is clearly aware of the challenge of getting the remaining 900 million poor people up the income ladder as quickly as possible to avoid the unrest that could emerge from economic disparity.

ECONOMIC DISPARITY TRUMPS ENVIRONMENTAL DEGRADATION

In his book, China Shakes the World, James Kynge suggests that Environmental Degradation is an important negative consequence of China’s rapid economic growth and the corrupt practices of local governments.

SKATING OVER THE “THIN ICE” OF SOCIAL UNREST AND ENVIRONMENTAL CATASTROPHE

As only he can, Tom Stewart succinctly summarizes the very delicate balance that China’s Leadership is dealing with as it strives to maintain sustainable economic growth.

CHINA’S ECONOMIC TRANSITION: QUESTIONS TO CONSIDER

Will social unrest explode in China as a result of the increasing disparity between the rich and poor?

Do the Chinese believe that the 30 year trend of 10% growth per year is economically and enviornmentally sustainable?

Do the Chinese believe that the Government should take a more balanced approach in driving economic growth while moderating environmental degradation?

Are the Chinese concerned about their ability to continue to access natural resources to fuel their growth? How might their “No Strings Attached” policies in dealing with trading partners create negative unanticipated outcomes for the country?

The conundrum for Chinese leaders is that they don’t really know what they want the country to be.

They just know they don’t want it to be what it used to be: a country that was so feudal that foreign powers could slice it up like a ripe melon as the Western powers and Japan did in the 1800s and first half of the 1900s.

They also don’t want the country to have a political system in which an untouchable dictator can manipulate the population into nearly destroying its social system and economy as Mao did from the Mid 1950s through the mid-1970s with the Great Leap Forward and the Cultural Revolution

They also don’t want to tear it apart with Western democratic politics which they view as an unsuitable and distorted system in which political leaders solicit votes by pushing emotional social issues that divide the population instead of focusing on what is good for national unity and economic development.

The Chinese leadership is basically trying to hold on to the Chinese population as tightly as it can for as long as it can before political factions emerge and bring inefficiencies that will almost certainly slow progress.

DOES ECONOMIC GROWTH CULMINATE IN DEMOCRATIC RULE?

One of the ongoing debates with regards to China is centered around the question as to whether or not a free market economy requires a democratic system of government.

For the past 30 years, China has experienced significant and stable growth of 10% per year, all the while under the rule of a single party communist system. Is this situation sustainable or is there a need for a modernization of the political system to accommodate the modernization of the economy?

Here, David Dollar suggests that every country that has reached a high GDP level has eventually become democratic.

However, here Dollar suggests that the ultimate path to democracy can be long and convoluted and that China could continue with Single-Party rule for a decade or longer.

Finally, Dollar suggests that there are many differing democratic political systems that are consistent with being a wealthy country so it is difficult to predict what path of political change China will go through over the next 20 Years.

HAS CHINA CREATED A SYSTEM OF AUTOCRATIC CAPITALISM?

James Traub suggests that China’s goal is to achieve a peaceful rise by working out the tremendous contradictions the country faces. In doing so, he suggests is that China has developed a means of economic, social and political organization that can both drive dramatic economic growth while maintaining single party rule. He calls this model Autocratic Capitalism.

IS CHINA CREATING A NEW KIND OF “VERTICAL DEMOCRACY?”

In their recent book China Megatrends, John and Doris Naisbitt suggest that China is in the midst of creating a new form of democratic governance they call Vertical Democracy where there is a balance of top down direction and bottom up initiatives where the leadership is tested by its results.

Here, the Naisbitts compare and contrast Western Democracy with this emerging social economic governance system in China.

In support of the Naisbitt’s perspective on Vertical Democracy, Mark Leonard suggests that while there is some voting at the village level, Chinese political reform will more likely involve different ways of brining the public into the political process in ways that do not involve party competition.

IS WESTERN DEMOCRACY PRODUCING SUB-OPTIMAL SOLUTIONS?

In this video Tom Friedman suggests that the Western Democratic style of governance is producing sub-optimial solutions for the major issues of our times while the Chinese governance is more purposeful and pragmatic in its approach.

CHINA’S POLITICAL TRANSITION: QUESTIONS TO CONSIDER

Can China continue to prosper economically without reforming its Single-Party political system?

Do the Chinese believe that there needs to be political reform? How satisfied are they with their current system of government?

How do the Chinese feel about Autocratic Capitalism and/or Vertical Democracy? Would they prefer a Western Democratic system?

Do the Chinese feel they have a voice in driving bottom up initiatives as described in Vertical Democracy?

Do the Chinese feel that their government system is delivering the desired results? Do they feel that they have recourse if it is not?

Do the Chinese believe that their system of Government yields more optimized solutions than a Western Democracy?

With records showing the establishment of the Xia Dynasty in the 21st century BC, China has a written history of over 4000 years. During much of this time, China was a leading nation from both a societal and economic perspective.

In this video, David Dollarprovides some specific insights on how China’s past informs its present.

EXAMINING CHINA’S HISTORIC TURMOIL

For our purposes the CCL course we will focus more directly on the period where China, the economic powerhouse that invented papermaking, weaving, printing, gunpowder and the compass, lost its leadership status due to war, semi-colonialism and Japanese occupation before regaining independence and moving through communist rule to becoming the economic superpower it is today.

Key transition points during this turbulent period in Chinese history include:

Japanese forces invade Manchuria in 1931 followed by a full scale invasion in 1937. During Japanese occupation, KMT party under Chiang Kai-sheck looses influence while Mao Zedong’s Communist Party gains favor. With the Japanese World War II surrender in 1945, Mao’s Communist Party expands its control.

In 1949 Chiang Kai-shek flees to the island of Formosa (Taiwan) taking with him the entire gold reserves of China and promising one day to liberate the mainland from the “communist bandits”

The Communist Party’s Third Plenary Session of the Eleventh Congress convenes in 1978 where Deng Xiaoping put in place a set of economic reforms that formed the basis for China’s renewed path to Economic Prominence with a synthesis of theories that became known as “socialist market economy.”

In 1989 the student protests at Tianamen Square violently put to an end by the Chinese military after 15 days of martial law. During the same year, stock markets open in Shanghai and Beijing